Music labels see smartphone streaming as the future

Experts explain why pure ad-funded streaming doesn't stack up

Music label bosses at some of Britain's major record labels are looking towards streaming music services as the future for commercial music.

However, many don't think that services that are heavily reliant on advertising-funded models stack up, according to digital music industry experts.

David Joseph, the boss of Universal Music, said recently that streaming services such as Last.fm, Spotify and YouTube were "eclipsing everything" in the business of making cash from recorded music.

Joseph told The Guardian this week: "It's a different digital currency to downloading. You're dealing there with 175 million single tracks bought a year compared to seven billion streams of music."

Joseph added: "The revenues are significantly growing and I fundamentally believe that streaming and subscription models with unlimited access on all devices are the future of our business. But will people still listen to albums, or just single tracks, or send playlists to their friends? Answer: all of the above.

"For music services to succeed they have to understand the fan and how artists work, and they need to be well marketed with, in the case of this model, integrated billing."

Ad-funded streaming doesn't stack up

Universal is fully behind Virgin Media's new music streaming service. However, some industry pundits that TechRadar have spoken to don't believe that advertising-funded streaming alone can provide a decent income for labels and artist to thrive.

"There is a general feeling amongst most labels that the pure advertising funded streaming just doesn't stack up, either for rights owners or for the services themselves as the value generated by the ads is simply not enough to make this a viable business," said digital music specialist Paul Brindley, CEO of Music Ally Ltd, to TechRadar.

"That's why the labels are so keen on freemium models which at least have an upgrade route to a paid-for subscription.

"But ad-funded streaming is very popular with consumers so rights owners will probably ultimately have to accept lower rates than they might feel they deserve or they may end up losing an important revenue stream."

Smartphone streaming is the future

Christian Ward, digital music PR specialist from Clarity Communications, told TechRadar that smartphones should be at the forefront of any music execs mind when they think about streaming: "Any future for music streaming has to have mobile/smartphone as its focus," he noted.

"I think that's how the next generation are going to be doing the majority of their listening."

With that in mind, Ward notes that Apple's latest plans for a subscription cut on iOS apps revenue plan announced this week is going to be crucial.

"Is it going to hobble Spotify, and will it drive more streaming services to Android? The labels will be looking warily at Apple trying to dominate another part of the music consumption pie, so will be interesting to see what they do - more bespoke offerings like this new Virgin one, or will they start to see Spotify in a more favourable light and put more of their effort there?"